Buy Havells India; target of Rs 447: GEPL Capital

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Buy Havells India; target of Rs 447: GEPL Capital

GEPL Capital is bullish on Havells India and has recommended buy rating on the stock with a target of Rs 447 in its August 2, 2011 research report.

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RELATED NEWS Buy ILandFS Trans; target of Rs 330: Sharekhan Buy M&M; target of Rs 735: Sharekhan Buy L&T; target of Rs 2011: Sharekhan ALSO READ See previous views by GEPL Capital See what other Experts & Brokerages are saying about Havells India See messages about Havells India Havells India BSE | NSE 31/05/12 Are Mutual Funds betting on Havells India?

GEPL Capital is bullish on Havells India and has recommended buy rating on the stock with a target of Rs 447 in its August 2, 2011 research report.

"Havells India reported a decent stand alone Q1FY12 Sales growth of 12% YoY at Rs 8.03bn, though EBITDA declined by 20 bps YoY due to higher raw material cost 9up by 13% YoY), employee expenses (up by 45% YoY) & other expenditure (up by 5% YoY). On consolidated basis sales grew by 15% YoY at Rs 15bn, though PAT growth was higher at 43% YoY. PAT margins at 5.3% increased by 100 bps YoY owing to strong performance by Sylvania."

"At CMP of Rs 355, the stock is currently trading at 14.8X its consolidated FY11 EPS of Rs 19.4 and 12X its FY12E consolidated consensus EPS of Rs 29. It is difficult to arrive at PE multiples based valuation because when compared to PE multiples attributed to C&G (12-13X FY12E consensus EPS) and Siemens (25X FY12E consensus EPS), the mismatch arises due to operational efficiencies and different markets they operate in. Hence it would be more prudent to follow EV/EBITDA based methodology and compare with both domestic & international peers. Domestically both C&G & Bajaj Electrical are trading at an average 1 year forward EV/EBITDA multiple of 9.5X, whereas internationally Thorpe Electric, Legrand & Schneider are trading at an average 1 year forward EV/EBITDA multiple of 7.2X (source Bloomberg). Considering the growth prospects Havells has to offer in its Domestic as well as international operations, we have valued Havells at 1 year forward EV/EBITDA of 10X giving a target price of Rs 447, hence a Buy rating, currently it is trading at 1 year forward EV/EBITDA of 7.1X," says GEPL Capital research report.

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